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CMA FOUNDATION SOLVED PAPERS: FUNDAMENTALS OF ACCOUNTING (DEC' 2017)


FOUNDATION COURSE EXAMINATION (December 2017)
Fundamentals of Accounting
Full Marks: 100
Time Allowed: 3 Hours
The figures in the margin on the right side indicate full marks.
This question paper has two parts. Both the sections are to be answered Subject to instructions given against each.
SECTION A
1. (a) Choose the correct answer from the given four alternatives:                          1x30=30

1)         Which one of the following character is not related to Financial Accounting?
a)      Evaluates the financial strength of the whole business.
b)      Based on monetary transactions of the enterprise.
c)       Reports are always subject to statutory audit.
d)      Reports are as per requirement of management.
2)         Which one of the following equation is correct?
a)      Owner’s Equity = Liability + Asset.
b)      Owner’s Equity = Asset – Liability
c)       Liability = Owner’s Equity + Asset
d)      Asset = Owner’s Equity – Liability
3)         Identify the ‘Personal Account’ from the following.
a)      Salary Payable Account.
b)      Taxes Paid Account.
c)       Investment Account.
d)      Trademark Account.
4)         Which of the following is a transaction of contra entry?
a)      Sale goods to Y Rs. 12,500.
b)      Godown rent Rs. 7,000 paid by cheque.
c)       Received Rs. 12,000 in full settlement of Rs. 12,500.
d)      Cash deposited to bank Rs. 9,000
5)         When Trial balance will not tally/mismatch?
a)      Two errors those are compensating each other.
b)      A transaction recorded twice.
c)       Taking balance to the wrong side in the Trial Balance.
d)      If an entry is totally missed.
6)         An entry of Rs. 1,560 has been debited to a Debtor’s Personal Account at Rs. 1,650. It is an error of
a)      Omission.
b)      Commission.
c)       Principle.
d)      Compensating.
7)         Amount set apart to meet loss due to bad debt is a
a)      Provision.
b)      Appropriation.
c)       Reserve.
d)      Commission.
8)         Reduction in value of asset due to its continuous use is treated as
a)      Appreciation.
b)      Depreciation.
c)       Loss.
d)      Profit.
9)         What happens when a bad debt is recovered?
a)      Current asset decreases.
b)      Debtor’s balance decreases.
c)       Profit increases.
d)      Owner’s fund decreases.
10)         Which balance is not considered for closing entries on the basis of trial balance for transferring to Trading and Profit & Loss Account?
a)      Salary and Wages.
b)      Discount Received
c)       Commission Paid.
d)      Cash in Hand.
11)         Select correct journal entry to rectify an error “An amount of Rs. 10,000, withdrawn by owner for personal use debited to Trade Expenses Account”.
Debit                                                                     Credit
a)            Drawing Account                                         Trade Expenses A/c.
b)            Trade Expenses A/c                                    Drawing Account
c)             Drawing Account                                          Cash Account
d)            Trade Expenses A/c                                    Cash Account
12)         M/s. A. B. Enterprises has bank balance Rs. 8,800 as per cash book and the followings were found:
a)      Three cheque deposited in bank for Rs. 5,800 but only one cheque for Rs. 2,000 was cleared.
b)      Dividend collected by bank Rs. 1,250 was wrongly entered in cash book as Rs. 1,520. What is balance as per pass book?
A.      Rs. 3,480
B.      Rs. 4,730 (8,800-3,800-270)
C.      Rs. 2,730
D.      Rs. 3,750
13)         House Building Advance of Rs. 2.00 lakh paid to employee. It is a
a)            Asset.
b)            Revenue Expenditure.
c)             Capital Expenditure.
d)            Deferred Revenue Expenditure.
14)         Claims against company pending in court case. It is a
a)            Current Liability.
b)            Current Asset.
c)             Contingent Liability.
d)            Un-secured Loan.
15)         Which one of the following is not a negotiable instrument?
a)            Currency Note.
b)            Promissory Note.
c)             Bill of Exchange.
d)            Crossed Cheque.
16)         Which one of the following is not the feature of a joint venture business?
a)            Co-venture may or may not contribute initial capital.
b)            It has limited duration.
c)             It is done for specific purpose.
d)            Profit or loss on joint venture is shared as per their capital ratio.
17)         Del Credere Commission to consignment business is generally payable on
a)               Total sales.
b)               Only on credit sales.
c)                Other than credit sales.
d)               % of recovery of bad debt.
18)         Subscription received in advance is shown in
a)               Liability side of the Balance Sheet.
b)               Asset side of the Balance Sheet.
c)                Income & Expenditure Account as expenditure.
d)               Income & Expenditure Account as income.
19)         There are 250 members in the Sri Krishna Club where annual subscription is Rs. 500. During 2016-17, subscription received Rs. 97,500 and subscription receivable is Rs. 47,500. What amount of subscription received in advance during 2015-17?
a)            Rs. 20,000
b)            Rs. 25,000
c)             Rs. 27,500
d)            Rs. 50,000
20)         When goods are purchased for the joint venture, the account to be debited is
a)            Purchase Account.
b)            Joint venture Account.
c)             Venture’s Capital account
d)            Either Purchase account or Joint venture account.
21)         The abnormal loss on consignment is credited to
a)            Profit and Loss A/c.
b)            Consignee’s A/c.
c)             Consignment A/c.
d)            Insurance Company A/c.
22)         Fixed Asset and Current Assets are categorized as per concept of
a)            Separate Entity.
b)            Going Concern.
c)             Consistency.
d)            Time Period.
23)         An expenditure is in capital nature when
a)            The receiver of the amount is going to treat it for the purchase of fixed assets.
b)            It increase the quantity of fixed assets.
c)             It is paid as interests on loans for the business.
d)            It maintains a fixed assets.
24)         Cash book is a
a)            Subsidiary book.
b)            Subsidiary book and a Ledger A/c.
c)             Ledger A/c.
d)            None of the above.
25)         The periodical total of the Sales Return Book is posted to the
a)            Debit side of Sales A/c.
b)            Debit side of Sales Return Account.
c)             Credit side of Sales Return Account.
d)            Debit side of Debtors Return.
26)         The debts written off as bad, if recovered subsequently are
a)            Credited to Bad Debts recovered Account.
b)            Credited to Trade receivables Account.
c)             Debited to Profit and Loss Account.
d)            None of the above.
27)         If bill drawn on 3rd July, 2017 for 40 days, payment must be made on
a)            16th August, 2017
b)            15th August, 2017
c)             12th August, 2017
d)            14th August, 2017
28)         Goods sent on consignment account is of the nature of
a)            Personal account.
b)            Nominal account.
c)             Real account.
d)            Sales account.
29)         What is the nature of ‘joint venture with co-venture account’?
a)            Nominal account.
b)            Real account.
c)             Personal account.
d)            None of the above.
30)         Which of the following items are shown in the income and expenditure account?
a)            Only items of capital nature.
b)            Only items of revenue nature which are received during the period of accounts.
c)             Only items of revenue nature pertaining to the period of accounts.
d)            Both the items of capital and revenue nature.
(b) State whether the following statements are True or False:                                                                              1x12=12
1)            Profit and Loss A/c covers a period and not the position on a particular day.             True
2)            The surplus of a non-profit organization is distributed amongst the members.        False
3)            Current asset + Current liabilities = Working capital.             False
4)            Discount on Bill of exchange is a loss for the drawer and gain for the drawee.          False
5)            The owner of the consignment stock is consignee.                               False
6)            Certificate of protest is issued by a Notary Public.                                 True
7)            Capital Account is a liability of the business.                             True
8)            Over casting of purchase book would affected purchase account.                                 True
9)            In case of mineral resources, depreciation is not provided but depletion is charged.  True
10)         The discount column of the cash book is not posted is an example of error of omission.     True
11)         Retirement of bill means sending the bill for collection.      False
12)         Cost of the goods includes all expenses incurred till the goods reach the premises of the consignee’s godown.              True
(c) Match the following:                                                           1x6=6

Column A

Column B
1.
Pre-receipt of income
1
Current Liability.
2.
Return Inward
3
Capital Expenditure.
3.
Wages paid of installation of machine
5
Real Account.
4.
Goodwill Account
4
AS-10.
5.
Fixed Assets
6
Current Assets.
6.
Rent Prepaid
2
Sales.


g.
Nominal Account.

Answer any four questions out of six questions:                                              8x4=32
2. On the basis of following information, prepare Three Column Cash Book in the books of Makkhan.
2017

November, 1
Opening cash balance was Rs. 13,800 and bank balance was Rs. 2,75,000
November, 4
Wages paid in cash Rs. 15,000
November, 5
Received cheque of Rs. 49,800 from L. K. Enterprise after allowing discount of Rs. 1,200. It was deposited into bank.
November, 7
Paid electricity charges by cheque of Rs. 17,500.
November, 10
Cash of Rs. 12,500 withdrawn from bank.
November, 12
Received a cheque for Rs. 49,500 in full settlement of the account of Badhu & Co. at a discount of 10% and deposited the same into bank.
November, 15
Badhu & Co. cheque dishonoured and returned by the bank.
3. On 1st January, 2015 the KC Transport Company purchased a truck for Rs. 8,00,000. On 1st July, 2016 this truck was involved in an accident and was completely destroyed and Rs. 6,50,000 were received from the Insurance Company in full settlement. On the same date another truck was purchased by the company for Rs. 10,00,000. The company writes off 15% depreciation per annum on written down value method. Prepare the Truck Account and Depreciation Account for the years ended 31st March, 2015, 2016 and 2017.
4. From the following information, prepare a Bank Reconciliation Statement as on 31st March, 2017:
1)      The Bank column of the Cash Book showed overdraft of Rs. 1,15,000 on 31st March, 2017.
2)      Cheque of Rs. 42,400 issued but not en-cashed by the customers.
3)      Cheques deposited but not cleared Rs. 21,500.
4)      Collection charges debited by the Bank not recorded in the Cash Book Rs. 185.
5)      Bank interest charged by the Bank not recorded in the Cash Book Rs. 4,350.
6)      Cheques dishonoured debited by the Bank not recorded in the Cash Book Rs. 45,000.
7)      Interest directly received by the Bank not entered in the Cash Book Rs. 11,200.
5. The Trial Balance of a concern has agreed but the following mistakes were detected after the preparation of final accounts.
a)      No adjustment entry was passed for an amount of Rs. 4,000 relating to outstanding rent.
b)      Purchase book was overcast by Rs. 3,000.
c)       An amount of Rs. 4,000 as depreciation on furniture has been omitted to be recorded in the book.
d)      An amount of Rs. 5,000 received from a customer has been credited to Sales A/c.
State the effect of the above errors in Profit & Loss Account and Balance Sheet.
6. Following is the Trial Balance of M/s Chandu Traders as on 31st March, 2017. Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet on that date.
Particulars
Debit  (Rs.)
Credit  (Rs.)
Capital

9,00,000
Buildings
3,15,000

Drawings
1,18,000

Furniture & Fittings
17,500

Motor Van
1,25,000

Loan from Hari @ 12% interest

1,50,000
Interest paid on above
9,000

Sales

10,00,000
Purchases
7,50,000

Opening Stock
2,50,000

Establishment expenses
1,15,000

Wages
12,000

Insurance
11,000

Commission received

24,500
Sundry Debtors
3,28,100

Bank balance
2,46,900

Sundry Creditors

2,10,000
Interest

13,000
Total
22,97,500
22,97,500
Adjustments:
a)         The value of stock on 31-03-2017 was Rs. 3,20,000.
b)         Outstanding wages Rs. 1,500.
c)          Prepaid Insurance Rs. 3,000.
d)         Commission received in advance Rs. 13,000.
e)         Allow interest on capital @ 10%.
f)          Depreciate building 10%; Furniture & Fitting 10%; and Motor van 15%.
g)         Charge interest on drawings Rs. 5,000.
h)         Accrued Interest Rs. 2,500.
7. Gaddu sent goods costing Rs. 15,10,000 on consignment basis to Sakku on 1st April, 2017 @ 5% commission. Gaddu spent Rs. 1,65,000 on transportation and Sakku spent Rs. 1,05,000 on for unloading charges. Sakku sold 88% of the goods for Rs. 18,00,000. 10% of the goods for Rs. 2,00,000 and the balance are taken over by Sakku at 10% below the cost price and sent a cheque to Gaddu for the amount due after deducting commission. Show Consignment to Sakku A/c and Sakku’s A/c in the books of Gaddu.
SECTION – B
8. Choose the correct answer:                                                   1x12=12
1)         When re-ordering level is 200 units, minimum usage is 20 units, minimum lead time is 5 days, maximum stock is 400 units then re-ordering quantity will be
a)      400 units.
b)      200 units.
c)       300 units. (Max Level = ROL + ROQ – Min. Consumption x Min ROP)
d)      100 units.
2)         In the situation of increasing prices, the valuation of closing stock is more under
a)      Simple average.
b)      Weighted average.
c)       FIFO.
d)      LIFO. (LIFO = “Rising prices”, FIFO = “Falling Prices”)
3)         Payment of Royalties is
a)      Direct Expenses.
b)      Administrative Cost.
c)       Charged in Profit & Loss A/c.
d)      Factory Overheads.
4)         Which one of the following statement is true?
a)      Abnormal cost is not controllable.
b)      Financial Expenses can include in Cost Sheet.
c)       All overheads changes with the change in volume and in the same proportion.
d)      Primary packing is an item of prime cost.
5)         Costing is a technique of
a)      Recording of Cost transactions.
b)      Ascertaining Cost.
c)       Preparation of final accounts.
d)      Decision making.
6)         Which of following is appropriate Cost Unit for timber industry?
a)      Per tonne.
b)      Per article.
c)       Per Kg.
d)      Per foot.
7)         Which of the following is a Cost Control Technique?
a)      Marginal Costing.
b)      Uniform Costing.
c)       Standard Costing.
d)      Absorption Costing.
8)         Which of the following is differentiated between Fixed and Variable Costs?
a)      Uniform Costing.
b)      Marginal Costing.
c)       Standard Costing.
d)      Direct Costing.
9)         Cost of free samples and gifts are included in
a)      Prime Cost.
b)      Factory Overhead.
c)       Office and Administrative Overheads.
d)      Selling & Distribution Overheads.
10)         Which method of costing is used for determination of costs for printing industry?
a)      Process costing.
b)      Operating costing.
c)       Batch costing.
d)      Job costing.
11)         In behavioral analysis, cost are divided into
a)      Production and Non-Production costs.
b)      Controllable and Non-controllable costs.
c)       Direct and indirect costs.
d)      Fixed and variable costs.
12)         Which of the following is a part of both Prime cost and Conversion cost?
a)         Direct Material.
b)         Indirect Labour.
c)          Direct Labour.
d)         All of the above.
Answer any one question out of the following two questions:                  8x1=8
9. Distinguish between Cost Accounting and Management Accounting.
Ans: Difference between Cost accounting and Management Accounting
Cost accounting and Management accounting are two modern branches of accounting. Both the systems involve presentation of accounting data for the purpose of decision making and control of day-to-day activities. Cost accounting is concerned not only with cost ascertainment, but also cost control and managerial decision making.
Management accounting makes use of the cost accounting concepts, techniques and data. The functions of cost accounting and management accounting are complimentary. In cost accounting the emphasis is on cost determination while management accounting considers both the cost and revenue. Though it appears that there is overlapping of areas between cost and management accounting, the following are the differences between the two systems.
Basis
Cost accounting
Management accounting
a)   Purpose
The main objective of cost accounting is to ascertain and control the cost of products or services.
The function of management accounting is to provide information to management for efficiently performing the functions of planning, directing, and controlling.
b)   Emphasis
Cost accounting is based on both historical and present data.
Management according deals with future projections on the basis of historical and present cost data.
c)    Principles
Established procedures and practices are followed in cost accounting.
No such prescribed practices are followed in Management accounting.
d)   Data
Cost accounting uses only quantitative information.
Management accounting uses both qualitative and quantitative information.
e)   Scope
Cost accounting is concerned mainly with cost ascertainment and control.
Management accounting includes, financial accounting, cost accounting, budgeting, tax planning and reporting to management.
f)    Status
The Status of cost accountants comes after management accountant.
Management accountant is senior in position to cost accountant.
10. Rukmani Limited furnishes the following data relating to the year ending 31st March, 2017:
Opening Stock of Raw Material
Rs. 2,13,500
Closing Stock of Raw Material
Rs. 2,81,600
Purchases of Raw Material
Rs. 15,50,900
Direct Wages
Rs. 8,85,750
Carriage Inward on Raw Material
Rs. 11,200
Machine Hours Worked
4200 hours
Machine Hour Rate
Rs. 141
Office and Administrative Overhead
25% of Factory Overhead
Selling and Distribution Overhead
@ Rs. 8 per unit
Units produced
24,000 Units
Units Sold
21,500 Units @ 190 per unit
 You are required to prepare a statement of cost showing:
a)         Raw material consumed.
b)         Prime cost.
c)          Factory cost.
d)         Cost of production.
e)         Cost of sales
f)          Total profit and per unit profit.
Cost Sheet of Rukmani Limited
For the year ended on 31-03-2017

Particular
Units
Amount (Rs.)
Per unit
Opening Stock of Raw Material
Add:- Purchase of Raw Material
Carriage inward

Less: Closing Stock of Raw Material
(a) Raw Material Consumed
Add: Productive wages
(b) Prime cost
Add: Factory overheads (4200*141)
(ii) Works cost
Add: Office & Administrative overhead (25% of factory overheads)
(d) Cost of production
Less: Closing Stock of Finished goods
(e) Cost of goods sold
Add: Selling and distribution overhead - Rs. 8 per unit sold
Cost of Sales
Add: Profit of (20% of the selling price or 25% of cost)
Sales

2,13,500
15,50,900
11,200

17,75,600
2,81,600

14,94,000
8,85,750

23,79,750
5,92,200

29,71,950
1,48,050

24,000
2,500
31,20,000
3,25,000
130
130
21,500
34,45,000
1,72,000
130
8
21,500
36,17,000
4,68,000
138
52
21,500
40,85,000
190
***

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